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Navigating your tax obligations as a Self-Employed Virtual Assistant

Before we dive deeper into the details of managing your finances, let's first ensure we're all on the same page regarding important HMRC dates. From the tax year's end on April 5th to the commencement of the new tax year on April 6th, keeping track of these dates is crucial for staying compliant and avoiding penalties. Mark your calendars for key deadlines, including the deadline for registering for Self-Assessment by October 5th and the final deadline for online tax returns and payments on January 31st each year.

Registering with HMRC:

If you're running your own business for the first time, ensuring you register with HMRC is a critical first step. Remember, you must register by October 5th following the end of the tax year in which you commenced trading. For instance, if you began trading in June 2023, ensure you have registered by October 5th, 2024, to avoid any penalties.

Maximising Business Expenses:

As a sole trader, claiming allowable expenses can significantly reduce your taxable income, thereby minimising the tax you owe. From office and travel costs to advertising and training expenses, it's essential to keep meticulous records of all expenses incurred solely for business purposes. Remember, these expenses must be "wholly and exclusively" for the operation of your business to qualify for tax relief. You can find out more about expenses if you are self-employed here.

Alternatively, if you prefer a simplified approach to expense management, consider leveraging the tax-free Trading Allowance. This fixed allowance allows you to deduct up to £1,000 from your profit without the need for detailed expense tracking. However, if your actual expenses exceed £1,000, it may be more advantageous to itemise your expenses for greater tax savings.

Transitioning to Making Tax Digital (MTD):

It’s been on the cards for years but the latest information from the government says that you will need to follow the Making Tax Digital Guidelines from:

6 April 2026 if you have an annual business or property income of more than £50,000

April 2027 if you have an annual business or property income of more than £30,000

Making Tax Digital is a government-run initiative that aims to streamline tax reporting processes by digitising records and submissions. You can prepare for this transition by familiarising yourself with compatible software and ensuring your financial records meet HMRC's requirements. I personally use Xero, and have used Quickbooks and Freeagent for clients. 

You may currently use an Excel spreadsheet or even pen and paper to record your business finances, but MTD will mean you need to use accounting software going forward. Even if you are unsure if you will meet the financial turnover required by HMRC to register for MTD, it is well worth exploring what accounting software you would like to use and getting familiar with it at an early stage. It also makes record keeping super easy, and means that late invoices are automatically chased! 

Understanding Payments on Account

Unlike PAYE tax, self-assessment tax is collected in advance through Payments on Account (POAs). These payments, due on January 31st and July 31st, respectively, are based on HMRC's estimates of your upcoming tax liability. Keep a close eye on these payments to avoid any surprises come tax filing season.

All of this may feel daunting at first, but with the right knowledge and preparation, you can confidently fulfil your obligations and increase your tax efficiency. Remember to stay organised, keep accurate records, and seek professional advice when needed to ensure compliance with HMRC regulations.

*Information correct as of April 2024. Please note this does not constitute tax advice but is being shared as a starting point for you to access the appropriate resources. Consulting a book-keeper or accountant is recommended.

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